Student housing: Flexibility needed to get market moving

Flexibility will have to be the name of the game to get the student housing market moving again after the epidemic, experts agreed at Real Asset Media’s European Outlook: Student Housing investment briefing, which took place online recently.

‘People who have added the most flexibility to contracts are doing the best in terms of operators’ performance,’ said Luke Nolan, Founder & CEO, ‘It is a new thing for an industry used to being full all the time and having 9-12 month contracts.’

Photo by Brooke Cagle on Unsplash

Now the unprecedented situation due to Covid-19 is forcing companies to test new systems like starting in January instead of the Autumn.

‘We’re breaking the usual cycle and allowing more flexibility, which is very interesting,’ said Nolan. ‘In Australia, they’ve already experimented with shorter contracts of one semester and also dynamic pricing, which means that if you lock yourself in for two years you pay a lower rate, but if you only want six months then you pay more.’

Universities are doing their part in becoming more adaptable on term times and types of lessons and the ones that lay out clearly their policies to students are likely to be rewarded.

However, a balance needs to be struck between students’ need for flexibility and investors’ returns expectations.

‘There will be changes in tenancy agreements, but there cannot be a pandemic clause written into every contract,’ said Rob Waterhouse, Head of Transactions, Global Student Accommodation. ‘Investors and banks require an income so there has to be a certainty of cashflow or there will be an impact on valuations.’

Much will depend on when things will return to normality, but it is likely to be a long road back.

‘In our data what’s even more concerning than cancellations is the I don’t know bucket,’ said Nolan. ‘When it comes to international students there is a very high proportion of people who just cannot tell what they will be doing, which adds to the uncertainty.’

According to a snap poll conducted by Real Asset Media on when the majority of international students are likely to be back, 49% believe it will be no earlier than January 2021, 26% think it will be later this year, in the Autumn term, and 25% do not expect them to return until May 2021 or even later.

Missed the Real Asset Media student housing briefing? Catch up either with the video or download and listen to the podcast: